Buying or selling a business

This page is for: 
EmployerEmployee / worker

The information on this page applies only to employers and employees in the WA state industrial relations system. The state system covers businesses which operate as sole traders, unincorporated partnerships, unincorporated trust arragements as well as any incorporates associations or not for profit bodies that are not trading or finanical corporations. The Guide to who is in the WA State System has more detail.

This information does not apply to any business which operates as a Pty Ltd business and is a trading or finanical corporation nor to any incorporated association or not for profit body that is a trading or finanical corporation. These businesses and organistions are in the national fair work system and should visit the  Fair Work Ombudsman website for information on employment laws.

Selling a business means there has been a “transmission of business”.  Where this occurs, both the seller and the buyer of a business may have obligations to the employees of the business.

These obligations depend on whether the buyer intends to employ any of the seller’s employees and if so, whether these employees accept an offer of employment with the buyer. 

Buying or selling a business can be complex, and legal and accounting advice should be sought.

Seller obligations

When a business is sold, its employees are made redundant and their contracts of employment with the seller terminate. The seller’s obligation to their employees in this situation can vary depending on whether the buyer of the business employs the seller’s employees.  Outlined below are the obligations that apply.

 

Obligations applying to sellers

 

Obligations when the buyer DOES NOT employ the seller’s employees

Obligations when the buyer DOES employ the seller’s employees

Inform employees about intention to sell the business

Inform employees of the intended sale of the business and discuss the likely effects of the change

This should occur as soon as reasonably practicable after the decision to sell the business has been made

Inform employees of the intended sale of the business and discuss the likely effects of the change

This should occur as soon as reasonably practicable after the decision to sell the business has been made

Notice of termination

Provide notice of termination or pay in lieu of notice to eligible employees – the Dismissal notice periods page provides information on notice periods

Provide notice of termination or pay in lieu of notice to eligible employees – the Dismissal notice periods page provides information on notice periods

Notify Centrelink and consult with unions about the redundancies

Prior to the sale of the business, notify Centrelink and consult with relevant unions about the redundancies, regardless of the number of employees being made redundant by the sale of the business

If 15 or more employees are to be made redundant by the sale of the business, prior to the sale of the business notify Centrelink and consult with relevant unions about the redundancies

Annual leave

Pay out employees’ accrued annual leave

Pay out employees’ accrued annual leave

Long service leave

Pay out employees’ long service leave entitlements

 

In this situation the seller is not obliged to pay out employees’ long service leave entitlements

Once employed, the buyer will become responsible for the employees’ long service leave entitlements

Severance pay

Pay severance pay to employees, provided the business has 15 or more employees.

Note: some awards and agreements may require the payment of severance pay regardless of the number of employees in the business. The Redundancy payment obligations page provides further information about severance pay

In this situation the seller is not obliged to pay severance pay, provided the employee’s period of continuous service with the seller is recognised by the buyer

If an employee rejects an offer of employment with the buyer, the seller may not, in some circumstances, be obliged to pay severance pay.  The Redundancy payment obligations page provides more information on the circumstances where an employee may not be eligible for severance pay

Provide information about employees’ years of service

Not applicable

Once employed, the buyer is responsible for any accrued and future long service leave entitlements of the seller’s employees

It is therefore likely the buyer will request information from the seller about each employee’s accrued long service leave entitlements and length of service

Financial arrangements may be entered into between the buyer and seller to recognise accrued long service leave entitlements and service towards future long service leave accruals

Information regarding employees’ length of service is also relevant for unpaid parental leave as service with the seller will count towards the 12 months’ service required for an employee to be entitled to unpaid parental leave

Provide information about the awards, agreements and contracts of service in place

Not applicable

The buyer may request information from the seller about the awards, agreements and/or contracts of employment currently in place

Buyer obligations

The buyer of a business is not obligated to take on the employees of the seller – they will need to decide if they wish to do so and this is a matter to be discussed between the seller and buyer as part of the terms of sale.

If the buyer does not employ the seller’s employees, the buyer has no obligation to them. 

If the buyer intends to employ the seller’s employees, they should request information from the seller about any relevant awards, agreements and contracts of employment to understand the obligations they take on as the employees’ new employer.   They should also contact contact Wageline to ensure they understand their employment obligations.

The buyer will need to make employment offers to the seller’s employees and advise the seller’s employees in writing of their terms and conditions of employment.

If the buyer employs the seller’s employees, they are required to recognise each employee’s continuous service with the seller for the purposes of:

  • long service leave entitlements.  Refer to the long service leave page for more information.
  • unpaid parental leave.

Share this page:

Last modified: